I can reproduce this on high contrast edges with my own images (Canon G11 RAW, OSX Snow Leopard, RC2). The combination of high clarity, high shadows and enable profile lens corrections clicked on, gives very very visible distortions. If I click the lens profile corrections off and check closely at high magnifications, the artifacts are still there but not so visible.

I picked this up on edited images, not just trying to reproduce a bug.

The adhoc fix I'm using for images where it's causing problems is to paint out the problem areas with a localised adjustment brush with a very large hit of negative clarity. As most of the problem areas have been pretty small it's an easy fix, but I'd like to see the issue addressed before the final comes out as close examination has shown it up on quite a few images (reflective mike against black stage background, pier edges against a bright but cloudy sky, tree branches against the sky). I've also now set my default to having lens profile distortion off and only using it where I need it.

Edit to add: Unfortunately on the image I'm working on at the moment, it only removes it as long as clarity is set to less than 50 - I need the lens adjustment to get the horizon flat, and I want the clarity, but if I try to have both I'm getting nasty white streaks along the pylons of a pier and it shows at screen size let alone on prints or 100 per cent view. With this particular image any amount of clarity over about 15 and the profile image adjustment is producing ghastly results, visible at small sizes.

Edit again - urggggh. Manual adjustment to level horizons (beach images again) using lens correction plus clarity isn't good either. I've got rather a lot of those and basically can't use any amount of clarity or I start getting areas of light stripes along dark high contrast edges. However if i go to the crop and straighten settings, and straighten there, it's fine.

Edit again: Ok this is an app killer. Back to Lightroom 4.0 (If I can work out how!). Too many of my images are affected, and affected noticeably. What a shame as the defringing in RC2 is absolutely fantastic on long lenses, but this is affecting too much stuff.

I'm getting it on quite a few images I've done nothing to excepted converted them to LR4 - it's very clear on the before/after previews of PV2010 and PV2012. And the edges don't have to be that high contrast - I'm not sure if this screen shot shows it clearly enough but conversion gives a row of little white dashes along the green girder in the attached images Click on images to see them a bit larger- the first image shows small size before and after comparison with problem area highlighted - nothing done except change process PV2010 to PV2012; second image shows PV2012 magnified a bit. Turning off the enable profile corrections button returns image to PV2010 appearance. Removing clarity adjustment will also remove artifacting - in this case it's the clarity that is mucking things up. I can get the same artefacts with clarity on zero and the shadows pushed up above 70. Clarity gives problems at much lower settings.

Looks like Adobe might be aware of this issue - at least so far as ACR goes... ACR6.7 just got released yesterday as a final (as you may know, it's been out as a release candidiate for probably around two months now) and I was just reading the release notes, having seen this thread earlier on. One of the fixed issues caught my eye:

"Black halo/speckle artifacts could appear when performing an image warp. Examples of warps include lens profile adjustments and rotating the image."

Sounds as though this has been fixed in ACR, but has now become an issue in the latest LR4.1 RC instead! I therefore suspect that, when 4.1. if finally fully released, they should have sorted this issue. In the meantime, I'll avoid 4.1 RC2.

Looks like Adobe might be aware of this issue - at least so far as ACR goes... ACR6.7 just got released yesterday as a final (as you may know, it's been out as a release candidiate for probably around two months now) and I was just reading the release notes, having seen this thread earlier on. One of the fixed issues caught my eye:

"Black halo/speckle artifacts could appear when performing an image warp. Examples of warps include lens profile adjustments and rotating the image."

I just installed the ACR 6.7 final update, and when I open my test image (see above) in Photoshop CS5, I see exactly the same artefacts as LR produces (image is rendered by PS). So the issue seems to be not fixed, despite the release notes...

How about if you try processing the image in ACR, not LR, using the same settings (you'd probably need to reset everything first before opening the file in ACR)? Probably won't make any difference, at least in theory (as you say, PS is doing the rendering in this situation after all), but maybe worth a shot.

I can confirm LRusers result that opening one of my many "test" images with problems in LR 4.1RC2 into the final version of ACR6.7 in PS you get the same artifacting as in LR 4.1RC2. (Interestingly you don't get any of the fancy new defringing if you have applied it- I presume that will be in ACR in PSCS6 only)

Mollysnoot - ACR 6.7 doesn't have all the controls for PV2012 as it's strictly speaking one version behind LR4.0 so you can't do much processing. But just for giggles and for completeness, I opened my PV2010 version of a problematic file (which has never been opened into LR 4 - I have duplicates of my recent files as I am still evaluating LR4 on the trial period) straight into ACR 6.7 hosted in PS; PV2010 looks fine; then I switched to PV2012 and bingo, lots of nasty light streaks along dark edges. So it (as one would expect) makes no difference.

Mollysnoot - ACR 6.7 doesn't have all the controls for PV2012 as it's strictly speaking one version behind LR4.0 so you can't do much processing. But just for giggles and for completeness, I opened my PV2010 version of a problematic file (which has never been opened into LR 4 - I have duplicates of my recent files as I am still evaluating LR4 on the trial period) straight into ACR 6.7 hosted in PS; PV2010 looks fine; then I switched to PV2012 and bingo, lots of nasty light streaks along dark edges. So it (as one would expect) makes no difference.

Doh! Of course that's the case. I did know that, but it slipped my mind when replying earlier on.

Basically then, it seems that the "final" release of ACR for CS5 is, along with LR4.1 RC2, in need of some serious attention regarding this problem.

It looks like any of the tools in the Lens Corrections panel that affect geometry will create the artifacts. This includes Lens Profile Distortion and all of the Manual Transform tools. The Angle tool in the Crop panel does not have this issue.

For now you can prevent this from occurring by changing your Lens Profile default setting to Distortion = 0 and leave all Transform controls = 0. If you need to rotate the image use the Crop tool's Angle adjustment.

This may be due to do changes made when Adobe added the new Defringe tools. It looks like really bad aliasing of the adjustments masks, which hopefully has an easy coding fix.

Because LR4 was released when PS-CS5/ACR6.x were current, ACR 6.7 should be able to read and render any PV2012 adjustments up through LR4.0 at least, you just don't have access to (most of) the PV2012 UI which will be in ACR7.x.

The ACR 6.7RC had an issue with brightness being way off. The ACR 6.7 final has a problem with the brightness being a little off, as well as these artifacts if geometric lens corrections have been applied.

This bug has been fixed in the Lightroom 4.1 release, available now. To get Lightroom 4.1, go to the Help menu in Lightroom and select Check for Updates, then follow the prompts. Or, you can download Lightroom 4.1 from adobe.com.